TOTAL Earnings Beat Estimates, Down Y/Y on Lower Prices

Integrated oil and gas company TOTAL S.A. TOT reported third-quarter 2014 operating earnings of $1.56 per share (€1.17 per share), surpassing the Zacks Consensus Estimate of $1.40 by 11.4%. Earnings were 2% lower than the year-ago figure of $1.59 per share (€1.20 per share).

The year-over-year decline in earnings was due to lower product prices.

Despite the year-over-year shortfall, earnings in the reported quarter were ahead of the market expectation. TOTAL's shares gained 0.95% yesterday to close at $58.64 on better-than-expected results.

Total Revenue

Total revenue was $60.36 billion, down 2% from $61.84 billion in the year-ago quarter.

Production

Total hydrocarbon production averaged 2,122 thousand barrels of oil equivalent (kboe) per day, decreasing 8% from the year-ago quarter. The decline was primarily attributable to the expiration of the Adco license in the United Arab Emirates and natural decline in production from mature assets. The aforesaid negatives were offset by lower planned maintenance and improved security condition in Nigeria and additions from new start-ups.

In the reported quarter, liquids production averaged 1,043 thousand barrels (MBbls) per day, down 11% from the prior-year quarter. Liquid production got a beating in the Middle East, Europe and South America, which pulled down the overall output.

Gas production was 5,902 thousand cubic feet (Mcf) per day, down 4% year over year. Weak production from Europe, Africa, Middle-East and South America more than offset the increase in gas production in North America, Asia-Pacific and CIS regions.

Realized Price

In third-quarter 2014, the realized price for Brent decreased 8% to $101.9 per barrel from $110.3 per barrel in the prior-year quarter. The average realized liquid price decreased 12% to $94.0 per barrel from $107.2 per barrel in third-quarter 2013.

Realized gas prices dropped 11% year over year to $6.40 per thousand btu (Mbtu). Realized hydrocarbon prices in third-quarter 2014 decreased to $69.1 per barrel of oil equivalents (boe) from $77.3 per boe in third-quarter 2013.

Financial Update

Cash and cash equivalents as of Sep 30, 2014, were $24.30 billion compared with $20.11 billion as of Sep 30, 2013.

The net debt-to-equity ratio was 27.8% at the end of third-quarter 2014 compared with 23.0% at the end of third-quarter 2013.

TOTAL's cash flow from operating activities in third-quarter 2014 was $7.64 billion compared with $9.18 billion in third-quarter 2013.

Sale and Purchase of Assets

TOTAL acquired assets worth $1.8 billion during the first nine months of 2014. The investments were made to acquire interest in Elk and Antelope discoveries in Papua New Guinea and the acquisition of additional Novatek shares. TOTAL continued to develop the Utica gas and condensate field in the United States.  

TOTAL disposed assets worth $3.38 billion in the first nine months of 2014 which comprised the sale of the Angola block 15/06 and Group's interest in the Shah Deniz field in Azerbaijan.

TOTAL's net investment in the first nine months of 2014 was $17.73 billion, up 3% from $17.14 billion in the comparable period of 2013.

Other Company Releases

Statoil ASA STO reported third-quarter earnings of 44 cents per share, in line with the Zacks Consensus Estimate.

BP plc BP reported third-quarter earnings of 99 cents, beating the Zacks Consensus Estimate of 90 cents by 10%.

Our View

Thanks to its cost saving initiative, TOTAL was able to lower its total operating expenses by nearly 2% from the prior year. We believe these cost saving measures will continue to have a positive impact on margins going forward.

TOTAL currently holds a Zacks Rank #5 (Strong Sell).

Another industry heavyweight ExxonMobil Corp. XOM is slated to release its third-quarter earnings on Oct 31, 2014. The Zacks Consensus Estimate is pegged at $1.75 per share.